The mortgage deposit is the upfront payment you make when buying a property. Getting the numbers right determines how much you can borrow, what rate you'll pay, and whether you qualify at all.
Basic Formula
Deposit = Property price × Deposit percentage
Loan needed = Property price − Deposit
LTV = Loan ÷ Property price × 100
Example: £300,000 property, 10% deposit:
Deposit = £300,000 × 0.10 = £30,000
Loan = £300,000 − £30,000 = £270,000
LTV = 270,000 ÷ 300,000 × 100 = 90%
How Deposit Size Affects Your Mortgage Rate
| LTV | Deposit % | Rate tier | Typical rate (2025) |
|---|---|---|---|
| 60% | 40% | Best | 4.2% |
| 75% | 25% | Excellent | 4.5% |
| 80% | 20% | Good | 4.8% |
| 90% | 10% | Standard | 5.3% |
| 95% | 5% | Limited options | 5.8% |
The difference between a 5% and 20% deposit can be £200–400/month on a typical mortgage.
The Real Cost of a Small Deposit
On a £280,000 loan at 5% for 25 years:
| Deposit | Rate | Monthly payment | Total interest |
|---|---|---|---|
| 5% (£15k) | 5.8% | £1,778 | £253,400 |
| 10% (£30k) | 5.3% | £1,700 | £230,000 |
| 20% (£60k) | 4.8% | £1,596 | £198,800 |
A 20% vs 5% deposit saves £54,600 in interest over the life of the loan.
Additional Buying Costs to Budget
| Cost | Typical amount |
|---|---|
| Stamp Duty (England) | 0–12% of purchase price |
| Solicitor fees | £1,500–£2,500 |
| Survey | £400–£1,500 |
| Mortgage arrangement fee | £0–£1,500 |
| Removal costs | £500–£2,000 |
| Initial furnishing | £1,000–£10,000 |
Total additional costs: typically £3,000–£10,000+
UK Government Schemes
Mortgage Guarantee Scheme (2023–2025): Government backs 5% deposit mortgages on properties up to £600,000, enabling more lenders to offer 95% LTV.
Lifetime ISA: Save up to £4,000/year and receive a 25% government bonus (max £1,000/year) to use toward a first home deposit. Must be used on properties up to £450,000.
How Much Deposit Do You Need?
The minimum is typically 5%, but 10% gives you significantly better rates. The sweet spots for rate tiers are at 25% and 40% LTV.
If you can't reach 10% yet: prioritise saving, consider Help to Buy or shared ownership, or look at lower-priced properties.